BurgerFi(BFI) - 2020 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited financial statements and management's analysis of OPES Acquisition Corp.'s financial condition and operations Item 1. Financial Statements This section presents OPES Acquisition Corp.'s unaudited condensed financial statements, including balance sheets, statements of operations, equity changes, cash flows, and explanatory notes Condensed Balance Sheets This table provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific reporting dates | ASSETS (Unaudited) | June 30, 2019 ($) | December 31, 2018 ($) | | :----------------- | :------------ | :---------------- | | Cash | $212,162 | $205,638 | | Prepaid expenses | $60,208 | $89,095 | | Total Current Assets | $272,370 | $294,733 | | Deferred tax asset | $10,399 | — | | Marketable securities held in Trust Account | $118,635,956 | $117,740,109 | | Total Assets | $118,918,725 | $118,034,842 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Account payable and accrued expenses | $261,686 | $256,301 | | Income taxes payable | $228,800 | $14,852 | | Total Liabilities | $490,486 | $271,153 | | Common stock subject to possible redemption | $113,428,238 | $112,763,686 | | Total Stockholders' Equity | $5,000,001 | $5,000,003 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $118,918,725 | $118,034,842 | Condensed Statements of Operations This table details the company's revenues, expenses, and net income or loss over specific reporting periods | Metric (Unaudited) | Three Months Ended June 30, 2019 ($) | Three Months Ended June 30, 2018 ($) | Six Months Ended June 30, 2019 ($) | Six Months Ended June 30, 2018 ($) | | :----------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating costs | $233,367 | $136,313 | $414,517 | $205,771 | | Loss from operations | $(233,367) | $(136,313) | $(414,517) | $(205,771) | | Interest income | $703,004 | $531,520 | $1,388,653 | $614,813 | | Unrealized gain (loss) on marketable securities | $17,202 | $(6,976) | $18,963 | $7,606 | | Other income | $720,206 | $524,544 | $1,407,616 | $622,419 | | Income before provision for income taxes | $486,839 | $388,231 | $993,099 | $416,648 | | Provision for income taxes | $(202,530) | $(81,528) | $(328,549) | $(87,496) | | Net income | $284,309 | $306,703 | $664,550 | $329,152 | | Weighted average shares outstanding, basic and diluted | 3,800,333 | 3,758,207 | 3,794,975 | 3,227,422 | | Basic and diluted net loss per common share | $(0.04) | $(0.00) | $(0.07) | $(0.03) | Condensed Statements of Changes in Stockholders' Equity This section outlines the changes in the company's equity components, including common stock, additional paid-in capital, and retained earnings | (Unaudited) | Common Stock Amount ($) | Additional Paid-in Capital ($) | Retained Earnings ($) | Total Stockholders' Equity ($) | | :---------- | :------------------ | :------------------------- | :---------------- | :------------------------- | | Balance – January 1, 2019 | $379 | $3,979,089 | $1,020,535 | $5,000,003 | | Change in value of common stock subject to possible redemption | $1 | $(380,236) | — | $(380,235) | | Net income | — | — | $380,241 | $380,241 | | Balance – March 31, 2019 | $380 | $3,598,853 | $1,400,776 | $5,000,009 | | Change in value of common stock subject to possible redemption | — | $(284,317) | — | $(284,317) | | Net income | — | — | $284,309 | $284,309 | | Balance – June 30, 2019 | $380 | $3,314,536 | $1,685,085 | $5,000,001 | | (Unaudited) | Common Shares | Common Stock Amount ($) | Additional Paid-in Capital ($) | Retained Earnings (Accumulated Deficit) ($) | Total Stockholders' Equity ($) | | :---------- | :------------ | :------------------ | :------------------------- | :-------------------------------------- | :------------------------- | | Balance – January 1, 2018 | 2,875,000 | $288 | $24,712 | $(1,176) | $23,824 | | Sale of 11,500,000 Units, net of underwriting discounts and offering expenses | 11,500,000 | $1,150 | $112,266,904 | — | $112,268,054 | | Sale of 445,000 Private Placement Units | 445,000 | $45 | $4,449,955 | — | $4,450,000 | | Proceeds from the sale of unit purchase option | — | — | $100 | — | $100 | | Common stock subject to possible redemption | (11,061,794) | $(1,107) | $(111,763,319) | — | $(111,764,426) | | Net income | — | — | — | $22,449 | $22,449 | | Balance – March 31, 2018 | 3,758,206 | $376 | $4,978,352 | $21,273 | $5,000,001 | | Change in value of common stock subject to possible redemption | 7,307 | $1 | $(306,704) | — | $(306,703) | | Net income | — | — | — | $306,703 | $306,703 | | Balance – June 30, 2018 | 3,765,243 | $377 | $4,671,648 | $327,976 | $5,000,001 | Condensed Statements of Cash Flows This table summarizes the cash inflows and outflows from operating, investing, and financing activities for the reported periods | Cash Flow Category (Unaudited) | Six Months Ended June 30, 2019 ($) | Six Months Ended June 30, 2018 ($) | | :----------------------------- | :----------------------------- | :----------------------------- | | Cash Flows from Operating Activities: | | | | Net income | $664,550 | $329,152 | | Adjustments to reconcile net income to net cash used in operating activities: | | | | Interest earned on marketable securities held in Trust Account | $(1,388,653) | $(614,813) | | Unrealized gain on marketable securities held in Trust Account | $(18,963) | $(7,606) | | Deferred tax benefit | $(10,399) | — | | Changes in operating assets and liabilities: | | | | Prepaid expenses | $28,887 | $(29,879) | | Accounts payable and accrued expenses | $5,385 | $155,088 | | Income taxes payable | $213,948 | $87,496 | | Net cash used in operating activities | $(505,245) | $(80,562) | | Cash Flows from Investing Activities: | | | | Cash withdrawn from Trust Account to pay franchise and income taxes | $511,769 | — | | Investment of cash in Trust Account | — | $(116,150,000) | | Net cash provided by (used in) investing activities | $511,769 | $(116,150,000) | | Cash Flows from Financing Activities: | | | | Proceeds from sale of Units, net of underwriting discounts paid | — | $112,700,000 | | Proceeds from sale of Private Placement Units | — | $4,450,000 | | Proceeds from Unit Purchase Option | — | $100 | | Advances from related party | — | $67,013 | | Repayment of advances from related party | — | $(67,013) | | Repayment of promissory note – related party | — | $(122,839) | | Payment of offering costs | — | $(306,247) | | Net cash provided by financing activities | — | $116,721,014 | | Net Change in Cash | $6,524 | $490,452 | | Cash – Beginning | $205,638 | $22,002 | | Cash – Ending | $212,162 | $512,454 | | Supplemental cash flow information: | | | | Cash paid for income taxes | $125,000 | — | | Non-cash investing and financing activities: | | | | Initial classification of common stock subject to possible redemption | — | $111,741,988 | | Change in value of common stock subject to possible redemption | $664,552 | $329,141 | Notes to Unaudited Condensed Financial Statements This section provides detailed explanations and disclosures supporting the unaudited condensed financial statements NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS OPES Acquisition Corp. is a blank check company formed in Delaware, focused on a Business Combination in Mexico, with proceeds from its IPO and private placement held in a Trust Account - OPES Acquisition Corp. is a blank check company incorporated in Delaware on July 24, 2017, with the purpose of effecting a Business Combination, currently focusing on businesses in Mexico[13] - The company consummated its Initial Public Offering on March 16, 2018, selling 10,000,000 units and an additional 1,500,000 units via over-allotment, generating gross proceeds of $115,000,000[15][18] - Simultaneously, 445,000 Private Placement Units were sold for $4,450,000, with a total of $116,150,000 from these proceeds placed in a Trust Account[16][18] - Stockholders have the opportunity to redeem their Public Shares for a pro rata portion of the Trust Account upon completion of a Business Combination[21] - The company has until September 16, 2019, to consummate a Business Combination; otherwise, it will redeem 100% of outstanding Public Shares and liquidate[23] NOTE 2. LIQUIDITY AND GOING CONCERN The company's liquidity and going concern status are in substantial doubt, relying on additional capital despite holding significant funds in its Trust Account - As of June 30, 2019, the Company had $212,162 in operating bank accounts and $118,635,956 in marketable securities held in the Trust Account[26] - Working capital was $45,216, excluding franchise and income taxes payable, which can be paid from interest earned in the Trust Account (approximately $2,486,000 as of June 30, 2019)[26] - The Company will need to raise additional capital through loans or investments from its Sponsor, stockholders, officers, directors, or third parties to meet working capital needs[29] - These conditions raise substantial doubt about the Company's ability to continue as a going concern[29] NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This section details the company's significant accounting policies, including GAAP basis, emerging growth company status, and treatment of financial instruments and equity - The financial statements are prepared in accordance with GAAP for interim financial information and SEC regulations[30] - The Company is an 'emerging growth company' and has elected to use the extended transition period for complying with new or revised financial accounting standards[32][33] - Common stock subject to possible redemption is presented at redemption value as temporary equity, outside of stockholders' equity, due to redemption rights outside the Company's control[38] - Net loss per common share is computed using the two-class method, adjusting for income attributable to common stock subject to possible redemption[42][43] NOTE 4. INITIAL PUBLIC OFFERING The company completed its Initial Public Offering, selling 11,500,000 units at $10.00 each, with each unit comprising one common stock share and one Public Warrant - The Company sold 11,500,000 units in its Initial Public Offering at $10.00 per unit, including 1,500,000 units from the underwriters' over-allotment option[47] - Each unit comprises one share of common stock and one Public Warrant, with each warrant allowing the holder to purchase one share of common stock at an exercise price of $11.50[47] NOTE 5. PRIVATE PLACEMENT Initial Stockholders and the Sponsor purchased 445,000 Private Placement Units for $4,450,000, with proceeds added to the Trust Account and warrants expiring if no Business Combination occurs - Initial Stockholders purchased 400,000 Private Placement Units for $4,000,000, and the Sponsor purchased an additional 45,000 units for $450,000[48] - Each Private Placement Unit includes one Placement Share and one Placement Warrant, exercisable at $11.50 per share[48] - Proceeds from the private placement were added to the Trust Account, and Placement Warrants will expire worthless if a Business Combination is not completed[48] NOTE 6. RELATED PARTY TRANSACTIONS This section details related party transactions, including Founder Share issuance, administrative service fees, and potential Working Capital Loans for Business Combination financing - In November 2017, 2,875,000 Founder Shares were issued to Axis Public Ventures for $25,000, with some shares later transferred to other Initial Stockholders[49] - The Company pays an affiliate of the Sponsor a monthly fee of $10,000 for administrative support, incurring $30,000 for the three months and $60,000 for the six months ended June 30, 2019[51] - The Sponsor, its affiliates, or Initial Stockholders may provide non-interest bearing Working Capital Loans, convertible into units at $10.00 per unit, to finance Business Combination transaction costs[52] NOTE 7. COMMITMENTS The company has commitments including registration rights, a $4,025,000 Business Combination Marketing Agreement fee, and a contingent $30,000,000 Forward Purchase Agreement - Holders of Founder Shares, Private Placement Units, and units from Working Capital Loans have registration rights[53] - The Company will pay EarlyBirdCapital, Inc. a cash fee of $4,025,000 upon the consummation of a Business Combination for advisory services[54] - Lion Point has a contingent forward purchase agreement to buy 3,000,000 units for $30,000,000 concurrently with a Business Combination, subject to their sole discretion[55] NOTE 8. STOCKHOLDERS' EQUITY This section details the company's equity structure, including authorized stock, outstanding common stock, warrant terms, and a Unit Purchase Option granted to EarlyBirdCapital - The Company is authorized to issue 10,000,000 shares of preferred stock and 100,000,000 shares of common stock[56][57] - As of June 30, 2019, there were 3,800,351 shares of common stock issued and outstanding, excluding 11,019,649 shares subject to possible redemption[57] - Public Warrants become exercisable 30 days after a Business Combination, allowing purchase of common stock at $11.50 per share, and may be redeemed by the Company under certain conditions[58][59] - Placement Warrants are identical to Public Warrants but are non-transferable, non-redeemable, and exercisable on a cashless basis as long as held by initial purchasers or permitted transferees[62] - A Unit Purchase Option was sold to EarlyBirdCapital for $100, allowing purchase of up to 750,000 units at $10.00 per unit, exercisable after a Business Combination and expiring March 17, 2023[63][64] NOTE 9. FAIR VALUE MEASUREMENTS The company applies ASC 820 for fair value measurements, classifying financial instruments into a three-level hierarchy, with fair values approximating carrying amounts - The Company uses ASC 820 for fair value measurements, classifying inputs into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[66][67][68] - The fair value of the Company's financial assets and liabilities approximates their carrying amounts, primarily due to their short-term nature[45] NOTE 10. SUBSEQUENT EVENTS The company reviewed subsequent events up to the financial statement issuance date and identified no events requiring adjustment or disclosure - The Company did not identify any subsequent events that would require adjustment or disclosure in the financial statements[70] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and operational results, focusing on its blank check status, non-operating income, liquidity challenges, and capital needs Overview OPES Acquisition Corp. is a blank check company formed to effect a business combination, primarily targeting businesses in Mexico - OPES Acquisition Corp. is a blank check company formed on July 24, 2017, to effect a business combination, primarily targeting businesses in Mexico[73] - The company completed its Initial Public Offering on March 16, 2018, and has since been searching for a target business[74] Results of Operations This section details the company's financial performance, primarily non-operating income from the Trust Account and operating costs - The Company has not generated any operating revenues to date, with activity limited to formation, IPO, and evaluation of business combination candidates[75] - Non-operating income is primarily derived from interest on marketable securities held in the Trust Account[75] | Metric | Three Months Ended June 30, 2019 ($) | Three Months Ended June 30, 2018 ($) | Six Months Ended June 30, 2019 ($) | Six Months Ended June 30, 2018 ($) | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income | $284,309 | $306,703 | $664,550 | $329,152 | | Interest Income | $703,004 | $531,520 | $1,388,653 | $614,813 | | Unrealized Gain (Loss) | $17,202 | $(6,976) | $18,963 | $7,606 | | Operating Costs | $233,367 | $136,313 | $414,517 | $205,771 | | Provision for Income Taxes | $202,530 | $81,528 | $328,549 | $87,496 | Liquidity and Capital Resources This section discusses the company's cash position, Trust Account funds, and the need for additional capital to support operations and a business combination - As of June 30, 2019, the Company had $118,635,956 in marketable securities in the Trust Account, including approximately $3,260,000 of interest income, which can be used to pay taxes[81] - Cash used in operating activities for the six months ended June 30, 2019, was $505,245[82] - The Company intends to use Trust Account funds to acquire a target business and pay related expenses, including a $4,025,000 fee to EarlyBirdCapital[83] - Lion Point has a contingent forward purchase agreement for $30,000,000 in units, which could provide additional funding for a business combination[84] - The Company had $212,162 in cash and $45,216 in working capital as of June 30, 2019, excluding taxes payable from Trust Account interest[86] - The Company needs to raise additional capital through loans or investments from related parties or third parties, as current conditions raise substantial doubt about its ability to continue as a going concern[87] Off-Balance Sheet Arrangements The company had no off-balance sheet arrangements as of the reporting date - The Company did not have any off-balance sheet arrangements as of June 30, 2019[88] Contractual obligations The company's contractual obligations are limited to administrative support fees, with no long-term debt or leases - The Company has no long-term debt, capital lease, operating lease, or long-term liabilities, except for a monthly fee of $10,000 to an affiliate of its executive officers for administrative support[89] Critical Accounting Policies This section highlights key accounting policies, including the treatment of redeemable common stock and net loss per share calculation - Key accounting policies include the treatment of common stock subject to possible redemption as temporary equity and the application of the two-class method for net loss per common share calculation[91][92] Recent accounting standards Management assesses that recently issued accounting pronouncements will not materially impact the company's financial statements - Management believes that recently issued, but not yet effective, accounting pronouncements would not materially affect the Company's financial statements if currently adopted[93] Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk The company was not exposed to significant market or interest rate risk as of June 30, 2019, due to Trust Account investments in short-term government securities - As of June 30, 2019, the Company was not subject to any material market or interest rate risk[94] - Proceeds in the Trust Account are invested in U.S. government treasury bills with maturities of 180 days or less or in money market funds, limiting exposure to interest rate risk[94] Item 4. Controls and Procedures Management evaluated disclosure controls and procedures as effective as of June 30, 2019, with no material changes in internal control over financial reporting during the quarter - The Company's disclosure controls and procedures were evaluated as effective at a reasonable assurance level as of June 30, 2019[96] - No material changes in internal control over financial reporting occurred during the fiscal quarter of 2019[97] PART II. OTHER INFORMATION This section provides details on unregistered equity sales, use of proceeds from registered securities, and a list of filed exhibits Item 5. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities This section details unregistered equity sales, including Founder Shares and Private Placement Units, and the use of proceeds from the Initial Public Offering, with funds placed in a Trust Account - In October 2017, 2,875,000 shares of common stock were issued to Axis Public Ventures for $25,000, exempt from registration under Section 4(a)(2) of the Securities Act[99] - The Initial Public Offering involved the sale of 11,500,000 units at $10.00 per unit, generating $115,000,000 in gross proceeds[100] - A private placement of 445,000 Private Units at $10.00 per unit generated $4,450,000, also exempt under Section 4(a)(2)[101] - A total of $116,150,000 from the IPO and private placement was placed in a Trust Account[103] - Underwriting discounts and commissions amounted to $2,300,000, with other offering costs totaling $431,946[103] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications under Sarbanes-Oxley and various XBRL documents - Exhibits include certifications from the CEO and CFO under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[106] - XBRL Instance, Schema, Calculation, Definition, Label, and Presentation Linkbase Documents are also filed[106] PART III. SIGNATURES This section contains the official signatures certifying the accuracy and completeness of the report Signatures The report is signed by OPES Acquisition Corp.'s Chief Executive Officer and Chief Financial Officer on August 14, 2019, certifying due authorization - The report was signed on August 14, 2019, by José Antonio Cañedo White, Chief Executive Officer, and Miguel Angel Villegas, Chief Financial Officer[108]